NOVEMBER 2021
P R O U D LY P R E S E N T I N G P R O P E R T Y M A R K E T I N S I G H T S I N R E A L-T I M E
A MESSAGE FROM OUR MANAGING DIRECTOR Great news as both the Sydney and Melbourne economies open up again and with that, an increase in the number of properties for sale. Scheduled auctions across our group are currently double where they were 12 months ago, while the number of listing authorities is up almost 12 per cent from last year. With so much stock on the market, it looks like we’re heading to a particularly strong late spring, and likely a bumper summer. This is great news for anyone looking to buy, and as we know, most sellers are subsequent buyers; it’s good news for many sellers as well. We’re proud that Ray White continues to be the preferred agency for more sellers than any other agency. In Australia, we hit a record market share in September, maintaining this position across all price categories. We also had a record revenue month for October, hitting more than $8 billion in unconditional sales. Our commitment to getting the best outcomes for our clients and a focus on auction as the best method of sale has resulted in strong levels of competition. Average active bidders at auction across Australia continue to hit record levels and the gap between highest prior offer and auction sale price remains well above average. Although it’s tempting to sell off market in such strong conditions, our research shows that this doesn’t lead to the best outcome if you’re looking to get the best price possible. With widespread lockdowns hopefully a thing of the past, our international borders starting to open up and life starting to get back to how it was prior to the pandemic, we’re all looking forward to spending time with our family and friends as we edge a bit closer to the holiday season.
Dan White Managing Director Ray White
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THIS MONTH IN R AY W H I T E N O W This month we take a look at what you should consider if you’re looking to sell. Price growth continues to accelerate but we’re starting to see days on market increase, a sign that there’s a growing gap between buyer and seller expectations. In addition, the first set of finance restrictions came into effect at the start of November - at present, they are light touch but may be ramped up at the start of 2022. In our state by state analysis, we hone into luxury markets around Australia. Luxury homes did far better during the pandemic than they otherwise would, driven by cheap finance, high savings rates and of course, some business types that did far better because of the pandemic. Every decade, the median of our most expensive suburbs have increased by $1 million however over the past decade, they have catapulted $2 million ahead. Every time there’s price acceleration, commentary around house price bubbles ramps up. This month we take a look at when Australia has experienced house price bubbles, and what has driven them. More importantly, we discuss whether we’re currently in a house price bubble. Finally, our commercial property story this month looks at what to look out for when investing in this type of property. From zoning to lease terms, it is generally more complicated than residential purchases. We hope you enjoy this month’s edition of Ray White Now.
Nerida Conisbee Chief Economist Ray White
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CONTENTS 6.
Why sell now?
10.
State of the luxury market 13.
Sydney
16.
Melbourne
18.
Brisbane
20.
Perth
22.
Adelaide
24.
Hobart and Launceston
26.
Canberra
28. Regional luxury 30.
Are we in a housing bubbble?
32.
What to look for when investing in commercial property
34.
About Ray White
35.
Ray White Economics team
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WHY SELL NOW? Property prices continue to rise and, at this stage, are showing no signs of slowing down. As we head into late spring, should you sell now? Or are you better to wait for more price growth? Most sellers are subsequent buyers. While the red hot property market has been great news for pricing, it has been a difficult market to buy in. Positively, listings are slowly recovering from the late start to what has traditionally been the strongest selling season. If you’re a seller that wants to buy back into the market, there will be more available over the coming months. In determining whether you should sell in this market, these are some considerations. Finance is starting to be restricted but at this stage a light touch only The big announcement impacting the property market in October was the Australian Prudential Regulation Authority’s (APRA) move to restrict lending through increasing the interest rate buffer. The buffer, which acts as a stress test for borrowers, has increased from 2.5 per cent to three per cent. This means that when assessing capacity to pay, banks must now look at whether that borrower can pay a loan at three per cent more than the current mortgage rate. It estimates that this will lead to a five per cent reduction in the amount borrowed by the typical borrower. At this stage, the restrictions that are being put in place are relatively minor and are unlikely to make a major impact on pricing overall. Macroprudential regulations tend to impact first home buyers and lower income earners most and as such, any impact is most likely to be felt in lower priced suburbs. While the restrictions are unlikely to lead to much of a hit on pricing, it is likely that further restrictions will be put in place if prices continue to rise at a rapid rate. As such, it’s almost impossible for prices to rise at anywhere near the same rate they have risen over the past 12 months in 2022. In New Zealand, the market which has introduced some of the most most strict restrictions this year, the level of restrictions has continued to rise as lending growth has continued.
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Competition for property remains strong For now, there’s no slow down in competition for property, despite the number of properties for sale beginning to increase. This will continue to flow through to price growth. Two measures that we use to determine the level of competition are the number of people actively bidding at auction. The second is the gap between the highest prior offer and the price that the property sold for at auction. Active bidding hit record highs in September. While there’s been talk that the market is slowing, we’re yet to see much evidence of this.
Bidding at auction is the most competitive it has ever been Average active bidders, 2018 to 2021 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Jan ’19
Jan ’20
Jan ’21
A total of 75,900 auctions were undertaken over this time period Source: Ray White
Gap between highest prior offer and auction sale price remains above average 13.0%
12.0
11.0
10.0
9.0 Jan ’20
Apr ’20
Jul ’20
Oct ’20
A total of 17,000 auctions reported over this time period Source: Ray White
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Jan ’21
Apr ’21
Jul ’21
Oct ’21
Selling seasons have now changed Traditionally, spring has been the strongest month to sell property. This however has now changed and we are seeing higher levels of listings at times that have traditionally been relatively slow. So much so that summer 2020 saw the second highest listings volumes recorded over the past five years. It was only beaten by spring of 2016. The changes to selling seasons has of course been driven by lockdowns and the difficulties in selling in these periods. Winter this year was gearing up to be a very strong season however lockdowns in Melbourne and Sydney changed this. The start of Spring has also been slow because of this. Late spring and summer 2022 are looking to be good months for selling property, primarily because of large numbers of people holding off selling since June 2021.
Will summer 2022 be the strongest summer on record? Listing volumes by season Summer 2016
416,296
Autumn 2016
515,626
Winter 2016
725,074
Spring 2016
823,198
Summer 2017
750,960
Autumn 2017
697,358
Winter 2017
634,864
Spring 2017
777,960
Summer 2018
664,346
Autumn 2018
650,956
Winter 2018
586,003
Spring 2018
495,644
Summer 2019
596,225
Autumn 2019
614,053
Winter 2019
422,517
Spring 2019
486,910
Summer 2020
543,658
Autumn 2020
604,926
Winter 2020
566,373
Spring 2020
659,524
Summer 2021
802,958
Autumn 2021
759,384
Winter 2021
704,506
Source: Ray White
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Days on market are starting to rise A consideration to make when selling is that days on market are starting to increase. The number of days a property stayed on market hit a record low in March 2021 with homes selling on average in 21 days. In September, this rose to 35 days. As to what is driving the slow down, it could be a number of factors. The first is that buyers are becoming more discerning, perhaps driven by very fast price growth and a subsequent hesitancy. The second could be lockdowns. It’s difficult to sell homes in lockdown. Not only do listings drop but so too does buyer activity - as a result homes take longer to sell, without necessarily impacting pricing. For now, price growth is continuing at a rapid rate but this is one indicator that suggests that it may start to slow as we head to the end of the year.
Hobart houses are selling the quickest in Australia Days on market by capital city Days on market 0
10
Greater Hobart
17.5
Greater Sydney
24
Greater Brisbane
31
Greater Adelaide
31
Greater Perth
34
Australian Capital Territory
34
Greater Melbourne
37
Greater Darwin
56
Australia
35
20
Source: Corelogic, Ray White 9
30
40
50
S TAT E O F T H E LUXURY MARKET COVID-19 has had a number of undeniable impacts on property markets - strong price growth, strong demand for big homes, a desire to move to regional areas, relatively weak rental markets and greater interest in holiday homes. Luxury property has also been far more highly in demand because of the pandemic. What
has
driven
the
luxury property market?
Similar conditions to the rest of the market - low interest rates, high savings rates, more time spent at home and a desire for space. Added to this has been some particularly strong p erformance of some parts of the economy because of the pandemic. The sectors that saw the biggest uplift in 2020 according to the ABS business survey include mining, health and retail trade. Anyone employed in very senior positions or with businesses in iron ore, pathology, large format retailing or supermarkets would have had a bumper year. Many of them have bought very nice homes as a result. There is no official definition for luxury however for our analysis, we have assumed that any suburb with a median over $3 million for houses is considered a luxury suburb. We have also taken a look at units however have reduced the median to $1.5 million for this analysis. Ultra luxury we have defined overall at $10 million plus for houses and for over $3 million for units.
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$4 MILLION IS THE NEW $1 MILLION Every decade, the most expensive suburbs of Australia go up around $1 million. In 2001, $1 million was the benchmark with five per cent of suburbs priced over this median. By 2011, it had increased to $2 million. This year, it should have been $3 million however particularly strong price growth through the pandemic has led to $4 million setting the benchmark.
$4 million is the new $1 million for houses Proportion of all Australian suburbs by price point, 2001|2011|2021 2001
2011
2021
2001
2011
$4 million the new $1 million 27.0% for houses $1 million plus is5.0%
Proportion of all Australian suburbs by price point, 2001|2011|2021 $2 million plus 1.0% 2001 2011 2021 $3 million plus 2001 0.0%
7.0% 3.0% 2011
$1 million plus $4 million plus
5.0% 0.0%
$2 million plus
1.0%
$3 million plus
0.0%
$4 million plus
0.0%
27.0% 1.0% 7.0%
2021 52.0% 20.0% 10.0%
2021
52.0% 5.0% 20.0%
3.0% 1.0%
10.0% 5.0%
Source: Ray White
For units, the price jumps for luxury have been lower. In 2001, $500,000 was the starting point for unit Source: Ray White in a high end suburb. has$1 now increased to houses $1.5 million. $4 million is theThat new million for
Proportion of all Australian suburbs by price point, 2001|2011|2021 2001
2011
2021
2001
2011
$1.5 million is the new $500,000 for units 5.0% 27.0% $1 million plus
Proportion of all Australian suburbs by unit price point, 2001|2011|2021 $2 million plus 1.0% 2001 2011 2021
7.0%
2021 52.0% 20.0%
$3 million plus
0.0% 2001
3.0% 2011
$500k plus $4 million plus
7.0% 0.0%
26.0% 1.0%
31.0% 5.0%
8.0%
16.0%
$1 million plus
1.0%
$1.5 million plus
0.0%
$2 million plus
0.0%
3.0% 2.0%
Source: Ray White
Source: Ray White
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2021 10.0%
7.0% 4.0%
T H E R I S E I N U LT R A L U X U R Y While $4 million will get you a house in the most expensive
The number of homes sold at these price points increased
suburbs of Australia, and $1.5 million will get a unit,
substantially during the pandemic, partly because price
it won’t get you the best houses in these suburbs. For this,
growth pushed more properties to this level. But also
COVID-19 has led to an uplift in luxury home sales because very strong demand prompted more people to sell.
you need to go a lot higher. While the cut off is arbitrary,
Sales volumes in the 18 months pre-COVID-19 and 18 months post-COVID-19
we have considered that $10 million plus for a house and
Across Australia, the number of luxury houses increased
$3 Houses million plusUnits for a unit would get you one of the best
by 70 per cent post pandemic. Luxury apartment sales
homes in Australia. Houses
increased Units by 40 per cent.
Pre-COVID-19
2,044
3,122
Post-COVID-19
3,475
4,346
COVID-19 has led to an uplift in luxury home sales Sales volumes in the 18 months pre-COVID-19 and 18 months post-COVID-19 Houses
Units
Houses Units Luxury homes are defined as being priced over $10 million while luxury apartments are priced over $3 million Pre-COVID-19 Source: Ray White 2,044
3,122
Post-COVID-19
4,346
3,475
Luxury homes are defined as being priced over $10 million while luxury apartments are priced over $3 million Source: Ray White
Not surprisingly, the most luxury homes and apartments
in inner Brisbane comes in second. Adelaide CBD also
are in New South Wales, specifically Sydney. This city
features on the top 10 list.
dominates both the most expensive suburbs and the luxury homes market. Almost all suburbs with a median
Regional areas have also seen a number of luxury sales.
over $4 million are in Sydney, with the exception of Toorak
Byron Bay tops the list. It has seen more than a doubling
in Melbourne and Newrybar in northern New South Wales.
of $10 million plus house sales through the pandemic.
Mosman tops the list nationally for the most $10 million
Dominating the list however are regional Queensland
house sales since the start of the pandemic.
locations, specifically Sunshine Coast and Gold Coast. While Melbourne has the second highest number of luxury
For apartments, the data looks a little different. Sydney is
house sales, it comes in third for luxury apartment sales.
the only city with suburbs that have a median unit price
Queensland comes in second primarily because of the
over $1.5 million and the Sydney CBD has had the most
large number of luxury apartments on the Gold Coast and
apartment sales over $3 million. However Kangaroo Point
Sunshine Coast.
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New South Wales, and specifically Sydney, dominate luxury sales Luxury sales volumes in the 18 months post-COVID-19 Houses
Units
Houses
Units
NSW
2,438
3,113
VIC
744
396
WA
181
QLD
116
80
SA
25
TAS
4
NT
3
546 115 60 0
Luxury homes are defined as being priced over $10 million while luxury apartments are priced over $3 million Source: Ray White
What is the outlook for the market for luxury property? Finance restrictions came into place on 1 November, however research has shown that these primarily impact first home buyers and lower priced areas. If you were hoping to get a bargain mansion or luxury apartment on the Sunshine Coast, Bronte or Toorak, you may be out of luck.
S Y D N E Y D O M I N AT E S T H E L U X U R Y ( A N D U LT R A - L U X U R Y ) M A R K E T If you want to buy the most expensive luxury in Australia, Sydney is of course the place to find it. Not only does the city have the most expensive suburbs, but the most expensive houses and units are also sold there. The most expensive suburb in Australia is Point Piper where the median house price is currently at $15 million. The suburb has increased in median house price by $5 million every decade over the past 20 years. While Point Piper dominates the list for most expensive houses, it has recently lost its title as having the most expensive apartments due to the development of Barangaroo. The median is currently almost $13 million, more than triple the Point Piper median for apartments, and almost at the same level as Point Piper houses. While it isn’t hard to find an expensive suburb in Sydney, it’s harder to find a luxury house for sale, although the number of properties for sale has improved over the pandemic. While Mosman doesn’t make the list for the most expensive suburbs, it has had the most $10 million plus house sales. Sydney CBD has had the most sales for units.
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14
Sydney's most expensive suburbs for houses and units Most expensive suburbs for houses
Most expensive suburbs for units
1
Point Piper
$15,000,000
Barangaroo
$12,795,000
2
Tamarama
$7,500,000
Point Piper
$4,060,000
3
Centennial Park
$7,380,000
Milsons Point
$2,125,000
4
Woolwich
$7,037,500
Millers Point
$2,000,000
5
Bellevue Hill
$6,700,000
Seaforth
$1,925,000
6
Whale Beach
$6,078,500
Dover Heights
$1,890,000
7
Cremorne Point
$6,050,000
Birchgrove
$1,890,000
8
Double Bay
$5,975,000
Darling Point
$1,850,000
9
Vaucluse
$5,900,000
Tamarama
$1,800,000
10
Darling Point
$5,750,000
Cremorne Point
$1,800,000
Source: Corelogic, Ray White
Sydney's top suburbs for luxury house and unit sales Number of luxury house and unit sales since the start of the pandemic
Luxury house sales
Luxury unit sales
1
Mosman
356
Sydney
271
2
Vaucluse
209
Manly
141
3
Bellevue Hill
184
Rose Bay
126
4
Bronte
96
Darling Point
115
5
Killara
90
Barangaroo
63
Luxury houses are defined as priced over $10 million. Luxury units are priced over $3 million Source: Ray White
What’s the outlook for luxury property in Sydney? Now that international borders are open again, this is good news for this market, particularly demand for brand new luxury apartments. The good times will continue for luxury as we head into 2022.
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M E L B O U R N E I S BAC K A N D W I T H I T T H E D E M A N D FO R LU X U RY Melbourne is well and truly back. The city is out of lockdown and international borders are back open. Luxury price growth has lagged other cities, particularly in inner urban areas. East Melbourne house prices have remained stable over the past 12 months while Deepdene and St Kilda West have declined. This is about to change. Like most things, activity surges in Melbourne following prolonged periods of dormancy and luxury property demand will be no exception. Toorak continues to be Melbourne’s most expensive suburb for houses and the list is dominated by traditional blue chip locations. The most surprising suburb on the list is Flinders on the Mornington Peninsula. Just five years ago, the median price in this suburb was just $1 million and was nowhere near the top. It now sits at $2.6 million. For apartments, the list is more mixed. New apartment development in suburbs like Beaumaris and Glen Waverley have pushed pricing up in these suburbs so they sit in the top 10. This is despite both of these suburbs being nowhere near the top 10 most expensive for houses.
16
Since the start of the pandemic we have seen an increase in the number of luxury properties for sale in Melbourne, however the increase has been relatively low compared to other capital cities. It’s likely that difficulties selling properties during extended lockdowns has made it more difficult, as has the comparatively slower price growth. Over the past 18 months, the most luxury sales of both houses and apartments have taken place in Toorak. However it’s been Hawthorn that has seen the biggest increase in availability.
Melbourne's most expensive suburbs for houses and units Most expensive suburbs for houses
Most expensive suburbs for units
1
Toorak
$5,475,000
Deepdene
$1,325,000
2
East Melbourne
$3,500,000
Toorak
$1,267,500
3
Brighton
$3,307,500
Kooyong
$1,200,000
4
Canterbury
$3,075,000
Brighton East
$1,139,500
5
Portsea
$2,900,000
Eaglemont
$1,134,000
6
Malvern
$2,884,000
Beaumaris
$1,125,000
7
Middle Park
$2,820,000
Mckinnon
$1,110,500
8
Deepdene
$2,815,000
Canterbury
$1,100,000
9
St Kilda West
$2,750,000
Brighton
$1,090,500
10
Flinders
$2,620,000
Mount Waverley
$1,060,500
Source: Corelogic, Ray White
Melbourne's top suburbs for luxury house and unit sales Number of luxury house and unit sales since the start of the pandemic
Luxury house sales
Luxury unit sales
1
Toorak
154
Toorak
71
2
Brighton
111
South Yarra
44
3
Hawthorn
57
Melbourne
41
4
Kew
48
Brighton
40
5
Malvern
30
Port Melbourne
20
Luxury houses are defined as priced over $10 million. Luxury units are priced over $3 million Source: Ray White
What’s the outlook for Melbourne luxury? Open borders and a return to normalcy is great news for the city. If you were hoping to find a bargain in Toorak, Flinders or Malvern, you may be out of luck.
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B R I S BA N E ’ S LU X U RY M A R K E T P OW E R S A H E A D Like the rest of Brisbane’s property market, luxury homes have done particularly well through the pandemic. Buoyed by low interest rates, high savings rates and of course high levels of migration from Sydney and Melbourne. While Brisbane residents tend to look historically for pricing benchmarks, new residents to the city are comparing Brisbane pricing to Sydney and Melbourne. As such, new pricing benchmarks are now being set. Brisbane now has two suburbs with house medians over $2 million - Teneriffe and New Farm. It’s highly likely that Ascot and Hamilton will hit this level early next year. Meanwhile, Tennyson is the first suburb to exceed $1 million median for units. An interesting difference between Brisbane and most other capital cities is that some of the most suburbs are quite far from the CBD. Burbank, Chandler and Pullenvale are three of the most expensive suburbs but are located more than 10 kms away from central Brisbane.
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Brisbane's most expensive suburbs for houses and units Most expensive suburbs for houses
Most expensive suburbs for units
1
Teneriffe
$2,250,000
Tennyson
$1,100,000
2
New Farm
$2,109,000
Bardon
$702,500
3
Ascot
$1,891,000
Kenmore
$681,500
4
Hamilton
$1,778,500
Teneriffe
$640,750
5
Burbank
$1,650,000
New Farm
$630,000
6
Chandler
$1,600,000
Bulimba
$622,500
7
Fortitude Valley
$1,535,000
Newstead
$618,000
8
St Lucia
$1,465,000
Grange
$605,000
9
Hawthorne
$1,435,000
The Gap
$585,000
10
Pullenvale
$1,402,500
Camp Hill
$583,750
Source: Corelogic, Ray White
Since the start of the pandemic, Brisbane has seen the biggest jump in $10 million plus sales with twice as many taking place in the 18 months post pandemic compared to the 18 months prior. This has in part been driven by strong price growth (more homes now being worth more than $10 million) but also because of very high demand. Anecdotally, downsizers have been particularly active, taking advantage of strong conditions.
Brisbane's top suburbs for luxury house and unit sales Number of luxury house and unit sales since the start of the pandemic
Luxury house sales
Luxury unit sales
1
Ascot
19
Kangaroo Point
220
2
Hamilton
14
New Farm
45
3
Kangaroo Point
8
Fortitude Valley
30
4
Teneriffe
6
Teneriffe
17
5
Clayfield
3
Newstead
14
Luxury houses are defined as priced over $10 million. Luxury units are priced over $3 million Source: Ray White
What’s the outlook for Brisbane’s luxury market? With high levels of migration expected to continue, combined with Brisbane’s olympic shine, strong demand is set to continue. This will lead to more $2 million suburbs, more homes selling for over $10 million and more luxury apartment development.
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P E RT H ’ S M I N I N G B O O M D R I V I N G T H E LU X U RY M A R K E T Boom times in Perth have led to prices taking off in the city’s most expensive suburbs, and a rush of luxury homes hitting the market. While the number of $10 million home sales increased by 70 per cent nationally, Perth saw a 150 per cent uplift. The best luxury housing market conditions in over seven years for the city has resulted in a rush of buyers and sellers. While there are a lot of similarities of this house price boom to the last one, the mix of most expensive suburbs has changed. Dalkeith is now as expensive as Peppermint Grove while Floreat and Mosman Park make the top 10, having achieved faster growth than Jolimont and Subiaco. Perth also has its first suburb to exceed a $1 million median for apartments - Floreat only recently exceeded this price point.
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Perth's most expensive suburbs for houses and units Most expensive suburbs for houses
Most expensive suburbs for units
1
Peppermint Grove
$2,800,000
Floreat
$1,365,000
2
Dalkeith
$2,800,000
Cottesloe
$785,000
3
Cottesloe
$2,420,000
North Fremantle
$767,500
4
City Beach
$2,200,000
Waterford
$750,000
5
Nedlands
$1,900,000
Swanbourne
$749,999
6
Swanbourne
$1,712,500
Mount Pleasant
$742,500
7
Claremont
$1,710,000
Applecross
$685,750
8
Applecross
$1,600,000
Claremont
$652,500
9
Floreat
$1,600,000
Burswood
$638,000
10
Mosman Park
$1,550,000
South Fremantle
$575,000
Source: Corelogic, Ray White
While Dalkeith has the same median as Peppermint Grove, more $10 million plus sales have taken place in Peppermint Grove since the start of the pandemic. The number of luxury sales in this suburb has increased four-fold since prior to the pandemic. Anecdotally, there has been a lot of downsizing activity occurring over the past 18 months, driven by some of the best conditions ever in the luxury home space.
Perth's top suburbs for luxury house and unit sales Number of luxury house and unit sales since the start of the pandemic
House sales
Unit sales
1
Peppermint Grove
26
South Perth
25
2
Mosman Park
23
Perth
23
3
Dalkeith
22
Scarborough
11
4
Applecross
14
Maylands
5
5
Swanbourne
North Fremantle
5
6
Luxury houses are defined as priced over $10 million. Luxury units are priced over $3 million Source: Ray White
What is the outlook for Perth luxury property? It’s still too early to say what will happen to iron ore pricing next year however international and state borders are likely to come down in early 2022. This will drive both population growth and property demand.
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ADELAIDE NOW HAS ITS FIRST $2 MILLION SUBURB Conditions have been particularly strong in Adelaide and the performance of the luxury sector is no exception. Unley Park, Adelaide’s most expensive suburb hit a $2 million median just recently while Rose Park is also getting closer. The drivers have been similar to what has buoyed the entire market - very low interest rates and high saving rates. Adelaide however has also been a net attractor of people from other states through the pandemic and it’s likely a fair bit of Sydney and Melbourne money is pushing things along. Unley Park is getting expensive, but compared to these cities, remains far more affordable.
Adelaide's most expensive suburbs for houses and units Most expensive suburbs for houses
Most expensive suburbs for units
1
Unley Park
$2,020,000
Glenelg
$683,000
2
Rose Park
$1,775,000
Marryatville
$621,750
3
Fitzroy
$1,675,000
Kensington
$590,750
4
Glenelg South
$1,675,000
Eastwood
$587,500
5
Toorak Gardens
$1,665,000
Norwood
$575,000
6
St Peters
$1,600,000
Tranmere
$574,900
7
Walkerville
$1,557,500
Highgate
$558,000
8
Medindie
$1,550,000
Parkside
$554,100
9
Leabrook
$1,495,000
Kent Town
$552,000
10
Tusmore
$1,432,000
North Brighton
$552,000
Source: Corelogic, Ray White
The composition of Adelaide’s most expensive suburbs hasn’t changed all that much over the past decade. Unley Park has consistently been the most expensive suburb, and at this time was the only suburb with a median over $1 million. The only changes have been Medindie and Leabrook making the top 10 most expensive, with their rate of price growth outpacing Malvern and Tennyson which were previously in the top 10. The outlook for Adelaide luxury remains positive. International and state borders are set to open soon and this will lead to a pick up in migration to the state, as well as a boost to economic growth. If you were hoping to pick up a beachside bargain luxury home in Glenelg South in 2022 you’re likely out of luck.
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H O B A R T A N D L A U N C E S T O N L U X U R Y M A R K E T A C C E L E R AT E S From not a single $1 million suburb just a few years ago to now having two, the most expensive suburbs of Hobart and Launceston have seen some of the best conditions of all cities. Battery Point and Sandy Bay now have medians well in excess of $1 million while Sandford, Glebe and Acton Park are likely to get there in 2022.
Hobart's most expensive suburbs for houses and units Most expensive suburbs for houses
Most expensive suburbs for units
1
Battery Point
$1,600,000
Battery Point
$920,000
2
Sandy Bay
$1,278,000
North Hobart
$840,000
3
Sandford
$940,000
Hobart
$735,000
4
Glebe
$935,000
West Hobart
$701,357
5
Acton Park
$900,000
Sandy Bay
$640,000
Source: Corelogic, Ray White
Meanwhile Launceston remains far more affordable. The most expensive suburb is East Launceston with a median of $710,000. Tasmania is getting expensive but the best properties in Hobart and Launceston remain far more affordable than many other capital cities.
Launceston's most expensive suburbs for houses and units Most expensive suburbs for houses
Most expensive suburbs for units
1
East Launceston
$710,000
Launceston
$420,000
2
Dilston
$700,000
Legana
$375,000
3
Grindelwald
$662,500
Youngtown
$352,500
4
Swan Bay
$652,500
Newstead
$345,000
5
Blackstone Heights
$650,000
Riverside
$335,000
Source: Corelogic, Ray White
For now, the outlook for the luxury market in Tasmania remains strong. Hobart’s house prices have increased by $330,000 on average over the past year meanwhile, Battery Point has increased by over $700.000. It’s highly likely that this suburb will hit a $2 million median sometime next year for houses. Unit prices are also accelerating and it’s possible that this reaches a $1 million median by the end of the year in Battery Point.
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CANBERRA Canberra has been one of the strongest property markets in Australia since the start of the pandemic and its luxury market is no exception. Almost all of Canberra’s most expensive suburbs have seen well in excess of 20 per cent price growth over the past 12 months. Forrest is set to hit a $3 million median within months while Reid, Yarralumla and Griffith are likely to get to $2 million in a similar time frame. Meanwhile, Canberra’s unit market remains far more affordable. While there are luxury apartments in Canberra, many of the city’s best suburbs also have far more affordable options. As a result, the highest median recorded is in Deakin, sitting at $795,000.
Canberra's most expensive suburbs for houses and units Most expensive suburbs for houses
Most expensive suburbs for units
1
Forrest
$2,950,000
Deakin
$795,000
2
O'Malley
$2,049,000
Yarralumla
$782,500
3
Reid
$1,887,500
Hughes
$775,000
4
Yarralumla
$1,850,000
Cook
$750,000
5
Griffith
$1,840,000
Weetangera
$733,000
6
Turner
$1,826,250
Nicholls
$687,000
7
Red Hill
$1,785,000
Campbell
$682,500
8
Deakin
$1,715,000
Isaacs
$680,000
9
Campbell
$1,560,000
Barton
$670,000
10
Garran
$1,451,000
Pearce
$650,000
Source: Corelogic, Ray White
The outlook for luxury homes in Canberra remains strong. The city is on track to hit a $1 million median within months and while price growth is starting to slow in some of our biggest cities, this is not the case in Canberra. If you were hoping to find a bargain mansion in Forrest or Reid, you’re likely out of luck.
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R EG I O N A L LU X U RY Regional areas are often thought of as more affordable than our capital cities. But when it comes to luxury, pricing can be far more excessive in regional Australia. Our most expensive regional areas are the Illawarra, Richmond-Tweed, Gold Coast, Sunshine Coast and Southern Highlands and Shoalhaven with the median for the Illawarra edging close to $1 million. At a suburb level, pricing becomes far more expensive. While Byron Bay has seen the most price growth since the start of the pandemic, the nearby hinterland is far more expensive. Newrybar in northern New South Wales now has a median of $4.5 million while Coorabell is just over $3 million. Newcastle is a regional city that is becoming very expensive. Bar Beach is almost at $3.5 million for houses while the Newcastle East unit median price is now at $1.25 million and Maryville is at $1.13 million. Overwhelmingly, beachside areas, or hinterland locations, dominate the list of most expensive suburbs however one alpine area makes the list. Crackenback, next to Thredbo, has a median unit price of $1.075 million.
Regional Australia's most expensive suburbs for houses and units Most expensive for houses
Most expensive for apartments
1
Newrybar
RichmondTweed
$4,500,000
Newcastle East
Hunter
$1,250,000
2
Bar Beach
Hunter
$3,462,500
Maryville
Hunter
$1,130,000
3
Coorabell
RichmondTweed
$3,005,000
Noosa Heads
Sunshine Coast
$1,100,000
4
Cooroy Mountain
Sunshine Coast
$2,875,000
Crackenback
South Eastern
$1,075,000
5
Byron Bay
RichmondTweed
$2,625,000
Suffolk Park
RichmondTweed
$1,073,250
6
Gerroa
Illawarra
$2,615,000
Sunshine Beach
Sunshine Coast
$1,025,000
7
Werri Beach
Illawarra
$2,437,500
Austinmer
Illawarra
$1,000,000
8
Myocum
RichmondTweed
$2,350,000
Hollywell
Gold Coast
$985,000
9
Burradoo
Illawarra
$2,325,000
Barwon Heads
Barwon
$970,000
10
Ewingsdale
RichmondTweed
$2,162,500
Brunswick Heads
RichmondTweed
$962,500
Source: Corelogic, Ray White
When it comes to ultra-luxury sales, defined as houses over $10 million and apartments over $3 million, it’s Byron Bay, Gold Coast and Sunshine Coast that dominates. Since the start of the pandemic, Byron Bay has had the most luxury house sales, followed by Surfers Paradise and Noosa Heads. Noosa Heads tops the list for luxury apartment sales.
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Regional Australia's top suburbs for luxury house and unit sales Number of luxury house and unit sales since the start of the pandemic
House sales
Unit sales
1
Byron Bay
32
Noosa Heads
68
2
Surfers Paradise
30
Surfers Paradise
58
3
Noosa Heads
30
Main Beach
47
4
Paradise Point
22
Palm Beach
45
5
Sunshine Beach
20
Burleigh Heads
32
6
Noosaville
15
Broadbeach
28
7
Palm Beach
15
Byron Bay
23
8
Broadbeach Waters
15
Noosaville
22
9
Hope Island
14
Mermaid Beach
15
10
Mermaid Beach
14
Mooloolaba
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Luxury houses are defined as priced over $10 million. Luxury units are priced over $3 million Source: Ray White
What’s the outlook for regional luxury? With international borders opening again and many people returning to the office, it’s likely that the particularly strong growth that we have seen in beachside holiday destinations will start to slow. These calmer conditions will be great news for luxury buyers, many who have struggled in such red hot market conditions.
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ARE WE IN A HOUSING BUBBBLE? Have you been hearing the term “house price bubble” a lot
was in Sydney during the Global Financial Crisis (GFC)
more lately? Given how much prices have risen, there has
when prices dropped 17 per cent between 2007 and 2009.
been rising concern that what goes up, must come down. There’s no doubt that pricing is particularly high at the
Although falls of more than 15 per cent are exceptionally
moment but is it a bubble?
rare, the times at which capital cities have had their biggest declines have generally had quite unique triggers to
In Australia, the incidence of house price bubbles is
their decline. The GFC was a trigger for a large price drop
extremely rare. While there’s technically no definition as
in Sydney house prices but also impacted Perth houses
to the percentage decline a housing market has to achieve
and units (iron ore also played a role) and Melbourne units.
to be called a bubble, for this analysis, I’ve assumed that prices drop by more than 15 per cent from peak to trough.
In Melbourne, a very deep recession in the early 1990s
Since the 1980s, there have only been two instances
led to a 7.4 per cent house price fall during that time.
where this has occurred. The most recent was in Darwin
Given that unemployment reached 12.5 per cent in
between 2015 and 2016 when prices dropped by 25
Victoria during that time period, it was a particularly mild
per cent, following the end of a mining boom. The other
house price downturn given the circumstances.
Largest house price decline periods by capital city City
Price decline
Date peak
1
Darwin
−24.2%
2015, Apr
2016, Nov
2
Sydney
2007, Dec
2009, Feb
3
Perth
2008, Jan
2009, Jan
4
Hobart
2012, May
2012, Sep
5
Brisbane
2010, Jun
2011, Nov
6
Melbourne
−7.4%
1990, Apr
1991, Apr
7
Adelaide
−7.3%
2011, Feb
2012, Apr
−17.1% −11.5% −10.6% −9.0%
Source: Corelogic, Ray White
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Date trough
Largest unit price decline periods by capital city City
Price decline
Date peak
Date trough
1
Perth
−15
2008, Jan
2009, Jan
2
Brisbane
1982, Feb
1983, Feb
3
Adelaide
1995, Feb
1996, Jul
4
Sydney
2017, Jun
2017, Oct
5
Melbourne
2008, Aug
2009, Feb
−13 −11 −9 −6
Source: Corelogic, Ray White
Also what’s interesting is the time it takes for prices to get
shouldn’t necessarily be controlled because of house
back to peak. Darwin’s mining boom price growth was so
price falls (e.g., interest rate increases). Restricting finance
extreme that prices still aren’t back to where they were.
can more easily be controlled and if it does lead to a
Sydney got back to pre-GFC pricing by October 2009,
drastic change in sentiment or pricing, can be more easily
just eight months following the trough. The driver of the
pulled back.
decline is important, as is sentiment towards property following the trough. The size of the market also seems
Of the above factors, interest rate increases are looking
to be a consideration. Smaller markets that are far more
unlikely for some time. Similarly, with borders reopening
dependent on a single economic driver (e.g, mining) are
and economic growth expected to accelerate again post
far more susceptible to sustained declines in pricing, larger
lockdowns, both a rise in unemployment and population
more diverse economies are less so.
decline also seem unlikely to occur. Iron ore price falls could be problematic however the impacts are likely to be
Are we in a house price bubble? As we have seen when
contained to Perth specifically.
looking at times at which prices have declined most in our capital cities, there needs to be a trigger. Potentially,
Right now, it is looking like restrictions to finance will be
these are some things that could lead to prices declining:
the mechanism to slow down lending growth, and by extension strong price growth. The first set of restrictions
• Greater restrictions on finance
came in on 1 November and is fundamentally a stress test
• Interest rate increases
for potential borrowers to ensure they can withstand a rise
• Iron ore price falls
in interest rates. This controlled slowing of the housing
• Rising unemployment
market means that for now, a significant dip in house
• Population decline
prices across Australia is highly unlikely. What we have to look forward to is a more stable market which is good news
More sustained price declines are generally driven by factors
for both buyers and sellers.
that can’t be controlled easily (e.g., iron ore price falls) or
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W H AT TO LO O K F O R WHEN INVESTING IN COMMERCIAL PROPERTY In 2021 we have seen a large increase in commercial sales transactions after a quiet 2020. Last year we saw both vendors and buyers adopt a “wait and see” attitude and were more cautious in coming to market and transacting in an uncertain economy. This year we have seen transaction levels soar as interest rates maintained their low rate with a combination of growing confidence and buyers' quest for increased returns. As a result we have witnessed a greater volume of first time buyers in the marketplace as well as experienced investors moving up the risk curve. Turnover levels have seen improvement across all asset classes notably industrial assets which have been best poised to weather the COVID-19 storm as well as alternative assets such as childcare, service stations and medical facilities. More traditional assets like retail and office continue to be in hot pursuit by savvy buyers however there are a number of fundamentals you need to watch for when purchasing your next commercial asset.
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Building approvals - Often we see assets which have been added to and amended over the years, be certain that the property you are purchasing has the adequate approval and its use is permissible under the current zoning. Check with the local council if you are unsure, this will limit future issues with building regulations and could save you from costly fines. Hidden problems - While it's hard to see some problems with the asset, ask the questions and ensure you are making an informed decision. Assets like older industrial sheds; what are they made from, will you possibly have an asbestos issue in the future? Are there subterrain tanks on the site which may see you needing to spend money on remediating the land in the future? Zoning - Just because a tenant is in place doesn’t necessarily mean their business type is permissible under current zoning legislation. Doing your homework on the zoning of your asset is a good exercise not just to understand who and what can occupy your property but to better understand possible highest and best uses of your property in time. Are you able to redevelop your asset to a different use or subdivide which may yield you a better return? Leases - Commercial leases are far more complex than residential leases so it may be worthwhile to have a professional review the clauses in place for your tenant. What are your rights and obligations as a landlord to the tenant, who pays for what and what reviews or options are in place for rental arrears, esculations, sub lease etc. A qualified property manager who can manage the asset, tenant and leasing process is often a big money saver in the long run. Research - Before you get too excited on the specifics of the asset, it's prudent to do some investigation into the asset type and location you are looking to purchase in. There are a number of key fundamentals to consider for any asset class; importantly understanding the supply of future competing stock, current occupancy rates and also local statistics like business starts and population growth. There are a number of government sources to collect this information and the council you are investigating will likely have a future plan for their LGA regarding business and development which will provide an insight into demand for your asset in the future. Auctions - We have seen a large increase in commercial assets selling under auction conditions this year. This method of sale allows vibrant competition between potential buyers and it's very easy to have a sense of FOMO and bid above your budget. Be cautious and set a limit in which you wish to purchase for, consider all the outgoings as well and the income and what yield you are willing to pay and stick to it! Exit strategy - While you are only just buying the asset now, it’s worth considering what your exit strategy may be and when you may be interested in disposing of the property. This may be driven by your finances, retirement plan, the length or time remaining on the lease or future potential redevelopment opportunities. While this plan can change, it is worth considering your options early and create a strategy around this asset, how it sits in your portfolio and what its future may look like.
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ABOUT RAY WHITE Ray White is a fourth generation family owned and led business. It was established in 1902 in the small Queensland country town of Crows Nest, and has grown into Australasia’s most successful real estate business, with more than 930 franchised offices across Australia, New Zealand, Indonesia and Hong Kong. Ray White today spans residential, commercial and rural property as well as marine and other specialist businesses. Now more than ever, the depth of experience and the breadth of Australasia’s largest real estate group brings unrivalled value to our customers. A group that has thrived through many periods of volatility, and one that will provide the strongest level of support to enable its customers make the best real estate decisions.
Ray White’s first auction house, ‘The Shed’ Crows Nest, Queensland.
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RAY WHITE ECONOMICS TEAM
Nerida Conisbee Chief Economist
Vanessa Rader Head of Commercial Research
Jordan Tormey Data Analyst
William Clark Data Analyst
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